BUDAPEST: Hungary's economy is on track to grow by over 4 percent next year despite a "more difficult" period ahead for the European economy, Finance Minister Mihaly Varga told Reuters in an interview on Wednesday.
Economic growth came in at a higher-than-expected annual 4.8 percent in the third quarter, just shy of a 4.9-percent clip in the second quarter -- the highest levels in over a decade.
Varga said government measures to boost domestic consumption as well as a high investment rate would continue to support the economy next year, while the manufacturing and services sectors would also contribute to keeping growth over 4 percent.
He said the Hungarian economy, which some analysts have said was too reliant on output by major German car-makers, has not yet felt any direct impact of a possible slowdown in car demand.
"What we hear from many places in Europe that German and European car sales have fallen by 6-7 percent, that is clearly the case, but that is not due to weaker demand but new regulations issued by the EU," Varga said.
He said Hungary, which relies heavily on EU funds for public sector investments, was expecting further reimbursements from Brussels for invoices filed so far.
Higher spending on pre-financing EU-backed projects pushed the cash-flow budget deficit above the full-year target in the first ten months, as reimbursements from the EU have been lagging due to a dispute with EU authorities.
"Last year we received reimbursements for invoices issued in early December," Varga said. "We have the same situation this year, but the gap has opened somewhat wider."
He said Hungary had pre-financed over 1.5 trillion forints ($5.32 billion) worth of spending, of which only some 600 billion have been reimbursed so far.
"Based on the current discussions, I am optimistic and expect that these funds will arrive by the end of the year."
NEW RETIREMENT BOND
Despite higher-than-expected inflation readings in the past two months, Varga said there was no reason to be concerned, as prices were lifted by temporary effects, such as an excise tax hike, and inflation would return to 3 percent next year.
Varga added that the government was planning to launch a new retirement bond to complement already available retirement savings programmes on the market, such as private pension funds.
He said the new, long-term bonds would mature when their owners reach retirement age and would either be paid in a lump sum with interest or in monthly instalments.
Varga said the retirement bond would be priced "similarly" to the already available baby bonds, which carry a 3 percent premium over inflation, but added that the premium could vary depending on the age of bond buyers. He said the new bond would be aimed at retail buyers, not institutional investors.
Varga said Hungary still aimed to lower the share of foreign currency debt in its total debt stock further, as well as curbing the share of foreign investors holding Hungarian government debt.
"From that regard, it is not in our interests to issue either a euro or a dollar bond already at the start of the year," he said.
He added however that Budapest was in continuous contact with Chinese partners, where it issued Panda bonds in July.
"And we have also restored the Japanese connection linked to the previous issuances. Our issuance permits would have expired, but we have decided to keep them alive."
Comments
Comments are closed.